BJ's goes private in $2.8B deal

BJ's Wholesale Club Inc was bought by private equity firms Leonard Green & Partners and CVC Capital Partners for $2.8 billion in cash, a price that shows a modest appetite for retail deals.

Phil Wahba and Jessica Wohl

NEW YORK — BJ's Wholesale Club Inc agreed to be bought by private equity firms Leonard Green & Partners and CVC Capital Partners for $2.8 billion in cash, a price that shows a modest appetite for retail deals.

Under terms of the deal announced Wednesday, the wholesale club's shareholders will get $51.25 a share. That is a premium of about 38 percent over the BJ's share price when Leonard Green disclosed a stake in the company a year ago.

Excluding the BJ's shares that Leonard Green already owns, the deal — the largest retail leveraged buyout this year and the fifth-largest overall — is worth just under $2.37 billion, according to Thomson Reuters data.

Shares of BJ's, which put itself up for sale in February, were up 4.6 percent to $50.31 in midday trading.

BJ's operates 190 warehouse clubs in 15 states concentrated on the East Coast. It is much smaller than Costco Wholesale Corp. and Wal-Mart Stores Inc.'s Sam's Club. All three charge members annual fees to shop for everything from diapers to electronics and gasoline at discounted prices.

"Uncertainty that a deal would get done has been weighing on BJ's stock price," said Wall Street Strategies analyst Brian Sozzi, noting the shares were down 8.3 percent from late April.

The price is fair, and being out of the public eye for a few years should help BJ's do what it needs to do to be more efficient, said Walter Stackow of Manning & Napier, which sold off its BJ's shares in late May for about $50 each.

BJ's, which opened its doors in 1984, has been trying to sell more everyday groceries to lure shoppers to its stores more often. It announced plans in January to close five stores, restructure some operations and bring in fresh management.

The company has a location in Hyannis, which has filed plans to expand. Those plans are currently pending before the Cape Cod Commission.

Taking BJ's private makes sense, as it may now try to expand nationally out of the public eye, said Janney Capital Markets analyst David Strasser.

BJ's shoppers traded down in both brands and package sizes in the latest quarter. Sales of items such as apparel, diapers and televisions fell.

Leonard Green, which manages $9 billion, holds stakes in a number of other retailers, including Whole Foods Market and luxury retailer Neiman Marcus Group. Earlier this year it bought fabric and craft products chain Jo Ann Stores Inc and linked up with TPG Capital to buy apparel retailer J. Crew.

Leonard Green also teamed up with the family that runs 99 Cents Only Stores to offer to take that chain private in March.